PRO-CON: Comcast-Time Warner merger

The nation's two largest cable companies have announced a $45 billion merger, leading many to wonder what happens to consumers if this deal goes through. Some say increased competition in the home entertainment industry makes this a good idea, while others say content providers and consumers will lose big.

PRO: Cable deal makes sense for industry

Say this about the deal announced Thursday for Comcast to buy Time Warner Cable: It's big. Big price tag of $45 billion. Big combined subscriber base of 30 million households. And, big risk of a veto from government antitrust regulators, whose approval is needed for the deal to proceed.

Remember when AT&T wanted to acquire T-Mobile in a similarly big acquisition? President Barack Obama's administration blocked that merger in 2011. In our view, that transaction should have won approval. Combining the wireless carriers made business sense and would have helped consumers receive improved services.

For the same reasons, we're inclined to favor a tie-up between the No. 1 and No. 2 cable operators. There's another reason why such a combo play doesn't bother us, even though it looks like a classic case of a big new company with more pricing power and market dominance:

American consumers have never had so many options for digital video news and entertainment, and those options are growing. Americans raised in an era of only three network TV channels now have computer, smartphone and TV access - a wealth not only of content, but of platforms to deliver that content. As this diversity of service options rapidly expands, the reflexive distrust of big-company mergers loses its oomph. In this realm consumers rule: They increasingly have the freedom to abandon any provider that tries to gouge them.

In sum, the initial worries about a Comcast-Time Warner deal seem overblown. We doubt that consumers would be stuck paying more for cable and broadband service, as some critics fear. We also doubt that content providers such as ESPN or The Weather Channel (now in a standoff with satellite provider DirecTV) would lose bargaining power in their future negotiations with a combined cable behemoth.

How so? For starters, Comcast and Time Warner operate cable systems with little overlap. In most of their markets, the two giants don't compete. Time Warner is big in New York City, for instance, and Comcast in New Jersey and Connecticut. Anticipating an objection from federal antitrust lawyers, Comcast said Thursday it would divest about 3 million subscribers in competitive markets if the deal wins approval. The government might reasonably require more divestitures - but probably not many more.

Another factor that would keep the merged company honest is the competition among delivery platforms. For years now, cable operators have lost customers not so much to each other as to the likes of AT&T, Verizon and DirecTV. Those competitors are expected to continue gaining market share against cable, whether or not this merger wins approval. Content providers routinely pit cable, telco and satellite operators against each other in negotiating deals. If Comcast dropped a popular channel that its archrivals in the same market still offered, its customers would bolt - a mutiny not possible in earlier decades when only cable or clunky antennas could provide content.

Today, though, Internet TV services such as Netflix and Hulu hold the potential to compete against or even cripple cable. It hasn't happened yet: Most users of those Web services also subscribe to pay TV. But as streaming improves and Internet companies perfect their business models, we expect to see an online challenge to cable that would provide ever more checks and balances in the marketplace. Don't be startled if, someday, technology improvements by its rivals render the cable industry extinct.

Comcast has volunteered to make additional concessions in the interest of online competition. It would, for instance, extend conditions imposed on its acquisition of NBC to a Time Warner deal. That would include supplying its programming to Netflix and other providers, and giving competitors equal speed and access on its broadband network.

The sluggish economy works in favor of a merger. Since the Great Recession, fewer new households have formed, which cuts into the number of newly occupied homes for cable to colonize. The weak recovery has left a larger share of households unable to afford pay TV no matter how much they want it. The cable audience isn't growing and won't any time soon.

These weak growth prospects and competitive challenges put a premium on efficiency. Comcast says the merger would result in significant cost savings, which ultimately would give it more latitude to offer its customers better deals.

Consumers also stand to benefit from investments Comcast has made in its systems, such as high-tech Xfinity branded products. In announcing the deal, the company pledged to deliver superior video, higher broadband speeds and the fastest in-home Wi-Fi to more households.

We know: promises, promises. Cable operators have a spotty history of delivering on bold claims. But cable companies have no choice but to keep modernizing, or their customers will desert them for noncable alternatives.

Our bottom line: If Comcast and Time-Warner are allowed to merge, bigger will lead to better.

- Chicago Tribune

CON: Consumers will suffer with merger

Say this about the deal announced Thursday for Comcast to buy Time Warner Cable: It's big. Big price tag of $45 billion. Big combined subscriber base of 30 million households. And, big risk of a veto from government antitrust regulators, whose approval is needed for the deal to proceed.

Remember when AT&T wanted to acquire T-Mobile in a similarly big acquisition? President Barack Obama's administration blocked that merger in 2011. In our view, that transaction should have won approval. Combining the wireless carriers made business sense and would have helped consumers receive improved services.

For the same reasons, we're inclined to favor a tie-up between the No. 1 and No. 2 cable operators. There's another reason why such a combo play doesn't bother us, even though it looks like a classic case of a big new company with more pricing power and market dominance:

American consumers have never had so many options for digital video news and entertainment, and those options are growing. Americans raised in an era of only three network TV channels now have computer, smartphone and TV access - a wealth not only of content, but of platforms to deliver that content. As this diversity of service options rapidly expands, the reflexive distrust of big-company mergers loses its oomph. In this realm consumers rule: They increasingly have the freedom to abandon any provider that tries to gouge them.

In sum, the initial worries about a Comcast-Time Warner deal seem overblown. We doubt that consumers would be stuck paying more for cable and broadband service, as some critics fear. We also doubt that content providers such as ESPN or The Weather Channel (now in a standoff with satellite provider DirecTV) would lose bargaining power in their future negotiations with a combined cable behemoth.

How so? For starters, Comcast and Time Warner operate cable systems with little overlap. In most of their markets, the two giants don't compete. Time Warner is big in New York City, for instance, and Comcast in New Jersey and Connecticut. Anticipating an objection from federal antitrust lawyers, Comcast said Thursday it would divest about 3 million subscribers in competitive markets if the deal wins approval. The government might reasonably require more divestitures - but probably not many more.

Another factor that would keep the merged company honest is the competition among delivery platforms. For years now, cable operators have lost customers not so much to each other as to the likes of AT&T, Verizon and DirecTV. Those competitors are expected to continue gaining market share against cable, whether or not this merger wins approval. Content providers routinely pit cable, telco and satellite operators against each other in negotiating deals. If Comcast dropped a popular channel that its archrivals in the same market still offered, its customers would bolt - a mutiny not possible in earlier decades when only cable or clunky antennas could provide content.

Today, though, Internet TV services such as Netflix and Hulu hold the potential to compete against or even cripple cable. It hasn't happened yet: Most users of those Web services also subscribe to pay TV. But as streaming improves and Internet companies perfect their business models, we expect to see an online challenge to cable that would provide ever more checks and balances in the marketplace. Don't be startled if, someday, technology improvements by its rivals render the cable industry extinct.

Comcast has volunteered to make additional concessions in the interest of online competition. It would, for instance, extend conditions imposed on its acquisition of NBC to a Time Warner deal. That would include supplying its programming to Netflix and other providers, and giving competitors equal speed and access on its broadband network.

The sluggish economy works in favor of a merger. Since the Great Recession, fewer new households have formed, which cuts into the number of newly occupied homes for cable to colonize. The weak recovery has left a larger share of households unable to afford pay TV no matter how much they want it. The cable audience isn't growing and won't any time soon.

These weak growth prospects and competitive challenges put a premium on efficiency. Comcast says the merger would result in significant cost savings, which ultimately would give it more latitude to offer its customers better deals.

Consumers also stand to benefit from investments Comcast has made in its systems, such as high-tech Xfinity branded products. In announcing the deal, the company pledged to deliver superior video, higher broadband speeds and the fastest in-home Wi-Fi to more households.

We know: promises, promises. Cable operators have a spotty history of delivering on bold claims. But cable companies have no choice but to keep modernizing, or their customers will desert them for noncable alternatives.

Our bottom line: If Comcast and Time-Warner are allowed to merge, bigger will lead to better.